The World is Making Other Plans

From Reuters;

TOKYO (Reuters) - "The role of the U.S. dollar as the key global currency will decline after the financial crisis, and its value may also weaken due to America's current account deficit, officials at some of Asia's top think tanks said."

"Chalongphob Sussangkarn, a former Thai finance minister and now president of Thailand Development Research Institute, also expressed worries about any sharp fall in the dollar."

"The U.S. deficit is so huge. This is why all countries, particularly East Asia, are concerned because we hold a lot of these assets. What happens if the U.S. dollar falls 40 percent? Many central bankers will be losing huge amounts of money."

From "The Japan Times";

"The U.S. alone can no longer resolve the current global economic crisis."

"In order for the entire Asian region to keep growing, we must create the third-polar regime in Asia by introducing the Asian common currency, which stands on par with the US Dollar and the euro," the report says."

From FT.com;

"China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund."

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC."

From the Straits Times;

"PARIS - IMF managing director Dominique Strauss-Kahn said on Wednesday that talks on a new world reserve currency to replace the US dollar were 'legitimate' and could take place 'in the coming months'."

From The Moscow Times;

"The Kremlin published its priorities Monday for an upcoming meeting of the G20, calling for the creation of a supranational reserve currency to be issued by international institutions as part of a reform of the global financial system."

Is it time to ask US citizens to "Get a Clue?"

The failure of Washington to rein in the abuses of our financial system will cause world leaders to seek remedies away from US interests. The continuing bailout of failed banks, the blind eye given to enforcement of existing law, and the elimination of protective law, has created a mountain of anger among world leaders.

Instead of listening to its people, the US government has committed an additional $8 Trillion to attempt to deal with the aftermath of "toxic" assets. Back last September, at a rate of 300:1, congressmen and congresswomen received faxes, phone calls and letters against the original EESA/TARP. Congress then voted, against their own constituents wishes, to grant Henry Paulson use of $700 Billion in taxpayer monies, at his own discretion, with no oversight.

Within weeks, the Federal Reserve committed the US taxpayer to a (illegal) buyout of AIG. Though Ben Bernanke, and Paulson, said the taxpayer would realize a profit from this venture, it has amounted to nothing but a $200 Billion loss. A great deal of that money has gone to companies which had already received TARP funds. It is reported that AIG still has over $2 Trillion in CDS contracts. Many anticipate that to be a 100% loss. Again, to be added to the national debt.

When the original TARP was not enough to keep otherwise insolvent banks from going under, the Federal Reserve began to negotiate directly with these banks. Citi now has guarantees for $300 Billion of "toxic" assets. Bank of America has guarantees of more than $100 Billion. Citi and Bank of America may very well have several times those "toxic" assets still outside of any regulatory view or control, that have yet to even be considered.

Now the government comes up with a plan to shift the losses of Trillions more in "toxic" assets to the taxpayers.

The banks, all of them, should be allowed to rise and fall on their own decisions. The creation of assets that are now toxic was the decision of a few. Those few should bear all of the consequences. Not the taxpayer. It is how a "Free Market" system is supposed to work.

Even though it has become obvious to the rest of the world, the average US citizen is oblivious. The reason congress acted as it did was for one reason: The US legislative process has devolved to nothing more than a system of lobbying. Only those with the money to pay for that lobbying have any voice in this system.

Nothing else explains why any congress person felt comfortable enough voting for the original TARP, when they heard from the people that elected them, at a rate of 300:1, against the TARP.

Funny thing is, two weeks later a national election occurred, and most of these congress folk were voted back into their seats.

Because more than 70% of all Treasuries issued sit in foreign accounts, the value of those Treasuries, and the dollar, sit in those accounts as well. At the rate the national debt is increasing, just to save banks that made bad decisions, many of these foreign holders of US debt are getting nervous. Initiatives to wean themselves from reliance on the US are being sown because of that nervousness.

Many foreign central banks feel the US has misled them. When most of the Treasuries they own were purchased, the US appeared to be a Free Market, and confidence in our system was high. Over the last 18 months, the actions of The Federal Reserve and US Treasury have quadrupled the amount we now owe. The majority of that increase has gone to otherwise insolvent banks to cover losses from toxic assets. Confidence in our ability to service the increasing debt goes down with every new Treasury sold. To a holder of US Treasuries, further commitments that may double the national debt from here, without creating new economic activity, will cause alarm.

Folks, this is very bad. Were it not for that initial confidence in our system, we would never have been able to sell that many Treasuries, and we would never have reached the current level of debt. Plans to increase our debt would never be started without that confidence. The world is politely telling us WE ARE LOSING THEIR CONFIDENCE. Pretty soon, the dialogue may not be so polite.

Unless our elected officials immediately start doing what is best for everyone, and not the privileged few, expect some drastic actions from those foreign holders of US debt.

BTW - Be like Yukon Cornelius and look for silver and gold.